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Will Only Another Great Depression Save America?

The economic crisis is really a political struggle between the rich and the rest of us.
 
 
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Americans are increasingly aware that the Great American Century is over. A November 2010 Rasmussen poll found that just over one-third (37 percent) of respondents believe America's best days are still ahead. Sadly, nearly half (47 percent) say the nation's best days are in the past. They wonder what will come next.

Officially, the Great Recession started in December 2007 and ended in June 2009. Unofficially, the living recession grinds on with millions of Americans remaining unemployed and underemployed, millions continuing to lose their homes due to foreclosure, and millions more joining the legion of the homeless, hungry and those without health care. The U.S. is today marked by second-rate health care, educational and telecommunication systems.

The question haunting America is simple: if the American Century is over, what comes next? Will only another Great Depression save America?

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The American Century was, symbolically, predicated on the Ozzie and Harriet myth of suburban home ownership; the popping of the housing bubble precipitated the Great Recession. As the myth of home ownership evaporates, the American Century ends.

In their important new book, Winner-Take-All Politics: How Washington Made the Rich Richer -- and Turned Its Back on the Middle Class, Jacob Hacker and Paul Pierson paint a grim picture of the nation's present state of affairs.

The authors, political science professors from Yale and Berkeley, respectively, critically assess the current situation. "The Wall Street of well-heeled bankers are thriving," they note, "while the Main Street of ordinary workers struggled amid the worst economic downturn since the Great Depression." They detail how, since the early '80s, the U.S. has "drifted away from a mixed-economy cluster and traveled a considerable distance toward another: the capitalist oligarchies" of Latin America.

They provide four valuable insights.

First, the current crisis is the result of four decades of economic and social restructuring driven by the demands of the rich and super-rich, especially the financial services sector, to capture more of the nation's wealth.

Second, this capitalist class has effectively taken control of the political process, capturing the Republican party and, to a lesser extent, the leadership of the Democrats as well.

Third, they have built a well-financed operation of think-tanks, lobbyists, astroturf shills, co-opted consumer groups, obsequious religious leaders, media bloviators and regulatory bureaucrats to make their message America's shared, self-evident truth.

And fourth, as a result of the first three factors, ordinary Americans, who they identify as the middle class, have not only lost their economic shirts, but their political influence and interest in politics as well.

Corporate capitalism has, over the last three decades, transformed America. Finance capital has come to dominate and manufacturing has been relocated from America's heartland to the lowest-paid machilador zones scattered across the globe. Corporatist policies, facilitated through federal tax, subsidy, trade and other programs, have left Detroit and other once-proud urban centers sinkholes of 21st-century underdevelopment.

Hacker and Pierson argue that the current economic crisis is really a political struggle between the rich and the rest of us. They document the process by which social wealth has been systematically expropriated by the rich from the American multitude. Ever so tasteful, the authors refuse to call this process "class war." However, the wealth of information they muster and their careful analysis makes it impossible to draw any other conclusion. America is in the grips of a bitter class war and the American people are losing.

At the heart of this intensifying class war is growing income inequality.

One example the authors offer is most illuminating: "The share of [national] income earned by the top 1 percent of Americans has increased from around 8 percent in 1974 to more than 18 percent in 2007." Going further, they add, "the only time since 1913 … that this share has been higher was 1928." More alarming, they note that the average annual income of the nation's top 1/10th of 1 percent (some 10,000 households) jumped from $4 million in 1974 to $35 million in 2007.

Other analyses, like those at the Economic Policy Institute, push the statistical data even further. The EPI argues that in 2006, the top 1 percent controlled 23 percent of all income and that today's super-rich have regained the position they held just prior to the 1929 stock market crash when they controlled 24 percent of all income. As the Great Recession grinds on, few can anticipate that the share controlled by the top 1 percent has not increased.

The great post-WWII income normalizer was the progressive income tax and, in the intervening decades, is disappearing. Between 1963 and 2003, the top bracket saw their tax rate decline to 35 percent from 91 percent.

Reagan's counter-revolution cut the tax rate for the richest from 70 percent to 28 percent. Under George H.W. Bush, the rate nosed up to 31 percent and increased further to 39.6 percent under President Clinton; it decreased to 35 percent under George W. Bush, where it stands today and -- with the new "bipartisan" financial agreement -- for the immediate future.

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In the wake of the 2010 elections, there is even less likelihood that the issues that caused the erosion of the American Century will be addressed. Rather, we are likely to see a deepening -- and increasingly vitriolic -- gridlock in Washington as the 2012 presidential election approaches. Unless there is a remarkable turnaround, Obama will likely fail in his reelection bid and the Democrats will suffer a further shellacking.

This could catapult a viciously right-wing corporatist clique into power, fueling ever-greater economic inequality, evangelical moral intolerance, neo-fascist and racist immigration policies, and a growing surveillance state. The worst tendencies in the American character will dominate and all will suffer.

In the short-term, over the coming two to five years, a meaningful, if modest, recovery may well take place. The jobless rate could decline to 6 to 7 percent, consumer-spending increase modestly, home purchases pick up and the stock market continue its upward tilt. However, the quality of life for the vast majority of Americans is likely to further deteriorate, with more people chasing minimum-wage jobs, unions further eviscerated and non-documented immigrants rounded up. Some are calling this possible short-term recovery the "new normal," a darker time marked by significantly lowered expectations signally the end to the American Century.

While relatively tolerable, the new normal gives us little faith in America's long-term prospects. There has been much blather from politicians and their paid talking-head pundits about a "new" or "green" economy. It sounds great and, in truth, it is the only way forward. Sadly, there has been little commitment to transform the national economy.

America's long-term future seems pretty bleak for the vast majority of the people. The legacy of a half-century of restructuring social wealth will likely buffer the baby-boomer generation and its children. But what happens to the following generation, the grandchildren of baby boomers, and their offspring? The nation's long-term prospects looks dismal.

 
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